Foreign ownership surcharge could turn buyers away, agents warn

Foreign investment surcharge could turn buyers away from South Australia, agents warn

Real estate agents specialising in overseas investors have warned the South Australian Government the way a new levy on foreign investment in residential property is being applied will damage the state’s reputation as a good place to invest.

Treasurer Tom Koutsantonis last week announced the Government had decided to increase a ‘foreign investor surcharge’ from 4 per cent to 7 per cent as part of the Government’s Budget Measures Bill.

The levy will apply to foreign investor property settlements from January next year.

Other states have introduced similar charges on foreign nationals investing in real estate, but the principal of DG Real Estate in Adelaide Simon Hou said South Australia was the only state imposing the levy from the settlement date rather than the date the contract of sale is signed.

Mr Hou said that means investors who bought a house or unit off the plan more than a year ago would have to pay an unexpected levy of 7 per cent if their property is not built before next year.

“It’s actually quite unfair and I think this will damage South Australia’s reputation badly,” he said.

Potential investors desert South Australia

Mr Hou said there were hundreds of people who had signed off-the-plan contracts before the levy was announced who were now being forced to pay the extra charge.

He said about 30 per cent of his clients were foreign investors, most of them buying accommodation for their children to live in while they study in Adelaide.

But since the announcement more than 50 potential investors had decided not to invest in South Australia.

In a statement the Mr Koutsantonis said investors understood there could be levy changes.

“Whenever someone buys an apartment off the plan, or with a very long settlement period, they do so in the knowledge there could be changes to stamp duty before settlement,” he said.

Adelaide based conveyancer Helen Wu said many of her foreign investor clients were pushing her to complete settlement before January.

“I deal with lots of foreign buyers so everyone wanted to settle before the end of this year but sometimes it’s out of our control,” she said.

Ms Wu said she expected many foreign investors would drop out of South Australia’s market as a result of the levy.

“I don’t think they will continue to buy in the future,” she said.

Property turnover ‘slowing down’

Auctioneer and real estate agent Jonathan Teng said recent changes to bank lending policies setting higher loan to value ratios for foreign investors had had a more significant impact on the number of foreign investors entering the South Australian market.

“The property turnover is slowing down and also the price of property might also be impacted in a negative way,” Mr Teng said.

Mr Hou is also the president of the China Business Network of South Australia, and has urged the State Government to allow a foreign investor surcharge exemption for residential property in Adelaide’s CBD to ease the negative impact on investment in the city.

He said the city needed foreign investment in residential units in the city.

“Over the last 15 years the CBD apartments don’t really have much capital growth or the majority of them actually have no growth over last 10 [to] 15 years,” Mr Hou said.

He said without foreign investment he thought “the CBD apartments might have a collapse in price in capital price”.

But Mr Koutsantonis has rejected the call for an exemption for Adelaide’s CBD.

He said the surcharge on foreign investment “is about ensuring South Australians aren’t priced out of their neighbourhoods by international investors”.

Source: http://mobile.abc.net.au/news/2017-11-20/foreign-investment-surcharge-could-turn-away-buyers-agents-warn/9171982

2 Comments Add yours

  1. Diane Wilson says:

    Good for Australia but the greedy real estate agents don’t care

    Like

  2. Ingelle MOORE says:

    It’s about time this levy was introduced though I feel it is not enough to prevent foreign ownership of Australian real estate.These estate agents are only motivated by greed & profit,depriving many young Australians from ever owning their own homes.What is really important to a happy,cohesive society-enormous profits for the few or a harmonious,well looked after community with affordable housing,green areas and a manageable infrastructure?

    Like

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